Demand for American whiskey in the States is starting to soften due to downtrading and a cutback in innovation, according to IWSR.
Data from IWSR’s US Navigator – which tracks monthly volume data in the US for all alcohol categories by price tier – showed that the American whiskey sector dipped by 1% in 2023.
The category’s volumes in the US dropped by 2% in the first eight months of 2024, driven by a decline for lower price tiers.
IWSR believes growth for the category has stalled in recent times as consumers tighten their budgets. It highlighted that volumes in the US previously rose at a compound annual growth rate (CAGR) of 5% between 2019 and 2022.
IWSR attributed the recent decrease almost entirely to the standard-and-below segment (750ml bottles below US$22.49), which accounted for a 59% share of the American whiskey category in 2023.
The standard segment fell by 4% between January and August 2024, while value brands declined by 8%.
The premium segment has been flat as some consumers traded down from the higher price tier to premium, but this was offset by downtrading from premium to standard-and-below or by drinkers leaving the American whiskey category, the IWSR said.
However, super-premium-and-above (products priced at US$30.50 and above) bucked the trend, rising by 6% over the eight-month period.
Demand softens in key states
IWSR has noticed ‘softening demand’ across the 10 largest markets for American whiskey in the US. California and Texas are the biggest states for the category.
States such as New York, Texas, Pennsylvania and Illinois made gains in the premium and super-premium price tiers, but IWSR said this growth rate is slowing. Meanwhile, the standard-and-below segment saw the largest decline in these states.
IWSR highlighted ‘significant’ drops for the premium tier in states like California, Florida and Kentucky, while the standard-and-below segment was flat.
It also credited the sector’s ‘softening demand’ to a ‘slight reduction’ in the number of new brands and products in the American whiskey category in 2023.
IWSR said it was difficult for the category to grow after ‘challenging prior-year comparisons for leading brands’.
Looking at the sales performance of some of the biggest players, the core Jack Daniel’s line dropped by 2% in the year to 30 April 2024. However, Suntory-owned Jim Beam posted 3% growth last year, and stablemates Maker’s Mark and Knob Creek rose by double digits. Diageo-owned Bulleit whiskey posted an 11% uptick in the 12 months to 30 June 2024.
Despite a volume slowdown, Kentucky distillers produced a record 2.7 million barrels of Bourbon in 2022, a report from the Kentucky Distillers’ Association revealed in February this year.
As such, IWSR believes production will not slow in the future as a result of many companies investing in the category.
‘Ongoing consolidation’
In its outlook, IWSR said there is a likelihood of ‘ongoing consolidation’ in the sector as smaller distillers are unable to ‘benefit from the economies of scale’ that larger producers have.
It also expects the super-premium-and-above segment to face ‘increasing pressure’ over the next 12 months as consumers seek value for their money.
IWSR warned that if prices of bottles were reduced to drive demand, it could ‘backfire’ and remove the need to pay for super-premium-and-above products.
While demand for lower-priced and premium bottles appear to be stalling, the high-end segment of the category appears to be in growth.
In its recent Status Spirits Report 2024 – which looks at bottles priced over US$100 – IWSR said American whiskey is now forecast to generate the greatest value growth to 2028.
The US$100-plus American whiskey segment in the States increased by 17% over the last five years (CAGR 2019-2023) as demand has risen for high-end Bourbon, rye and American single malt.
Earlier this year, IWSR revealed that global alcohol sales declined by 1% in volume in 2023 with spirits reporting its first drop in the US market in nearly three decades.
Data from the Distilled Spirits Council of the US showed that the American whiskey category’s value sales were up by 3.8% in the States last year, while volumes slipped slightly by 0.4% to 31.1m cases.
Super-premium American whiskey sales rose by 220,000 cases, and high-end American whiskey rose by 947,000 cases. Premium and value sales declined.
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Author: Nicola Carruthers
